Despite predictions to the contrary, the price of gas over the July 4 weekend dropped by two cents per gallon, confounding seers who were looking at gas approaching $4 a gallon. Those prognosticators were guilty of “straight-line thinking in a curvilinear world” — meaning that since gas this year was 20 cents a gallon more than a year ago, they believed it would continue to go up steadily for the foreseeable future.
With political disruptions in Iraq and Syria seriously reducing their contributions to the world’s oil supplies, one would think that prices would have to go straight up.
One would be wrong.
On July 4, Bank of America reported that U.S. production of crude oil (along with the liquids separated from natural gas) “surpassed all other countries this year with daily output exceeding 11 million barrels [per day] in the first quarter.” Francisco Blanch, BofA’s head of commodities research, told Bloomberg,
The U.S. increase in supply is a very meaningful chunk of oil. The shale boom is playing a key role in the U.S. recovery [from the Great Recession].
If the U.S. didn’t have this energy supply, prices at the pump would be completely unaffordable.
The nearly exponential growth in oil production, thanks to the free market’s invention and development of fracking technology, has put the United States firmly on the path of energy independence. As we become energy independent, disruptions in the supply chain from the Middle East will matter less and less.
Texas and North Dakota — which Professor Mark Perry calls “Saudi Texas” and “Saudi Dakota” respectively — are now producing almost half of all U.S. oil, and would rank as the fifth largest oil producing country as a separate nation. The growth in production is astonishing, according to Perry:
A decade ago the combined conventional crude oil production in the states of Texas and North Dakota … represented less than 21% of total U.S. crude oil output.
By 2008, the combined crude oil output in the two states … were producing one-third of all U.S. crude oil.
In eight out of the last nine months, their combined share exceeded 47% of all U.S. oil.
Perry predicts that it will exceed 50 percent sometime before the end of the year.
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